Sure wish Congress worked together, because we need to work out some major issues still, including improving health care system, which unlike GOP claims is FAR from best in world- certainly in cost efficiency.
Please lock Congress in a room without camera, without journalists and don't let 'em out until they get something done- like constitutional convention.
We seem to be making slow painful recovery, which perhaps is most that can be expected considering state of affairs after '08 crash.
Sure glad we haven't chosen too much austerity too quickly. All's one has to do is glance across 'the pond' to verify this assessment.
But there still remains LOTS to be done.
Trusting the private sector to "do the right thing", which was basically Greenspan's (among others) "Grand Philosophy" has been clearly exposed as not the best of all economic solution.

Also without communications facilities -- no phones, no computer access, no nothing.

And after the second day, shut down the air conditioning. After the first week, cut supplies to bread and water. After the second week, limit bathroom access to porta-potties on the floor; after the third, remove those as well. Who knows how bad it will have to become to get their attention.

Given that it would be pretty problematic to get anything useful out of them afterwards, perhaps that should be simply advertised as awaiting them if nothing useful results after 6 (3?) months. (By the time that the potties are shut down, they should be clear that the threats are not empty....)

The problem with 'across the pond' is that they've chosen both hefty tax increases and large spending cuts. That's the default center-left solution to deficits. What is needed instead are spending cuts alone, and government reform to make both the lower level of spending possible and the economy more efficient.

As much as we pontificate upon the causes and effects of the sequestration, I brood upon the fact that, indeed, these are ELECTED officials. The legislative branch is a reflection of the constituency/populace. Thus, I find it hard to argue that "the politicians are to blame" as they are the root of all America’s woes. Even if one were to argue that the American public is betrayed by their elected officials (consistently now for 1.5 decades), we would still be fools; less crass, greedy, and ignorant Philistines in accordance with the reflection argument. Of course, how can a narcissistic populace, hooked on Facebook and twitter, truly critique itself objectively? If we as a nation have lost our high values and can no longer accurately interpret reality, how could we possibly empirically judge and elect steadfast and forthcoming representatives? A democratic government is only as good as its constituency. (and yes; cynical Saturday is in full effect)

Very true, we as a nation are collectively on drugs with no sense of reality. We all demand security, freedom, cheap electronics, protection against disease, good infrastructure without agreeing to pay for any of these services. We do not understand basic economics, history, or science. The digital age has only made us more stupid since it has helped to spread idiotic ideologies much quicker.

It's not the narcissistic populace hooked on Facebook and twitter that's the problem, it's the parochial geezers who spout "small government" yet are hooked on Medicare and Social Security (which are much more generous than in Canada and I suspect "socialist" Europe). They are the electorate because they are the ones who vote. They are the hypocrites who mortgage their grandkids future for current government health and pension services while paying lip service to the need to reduce spending and balance the budget. America's biggest problem is not Republican vs. Democrat, it's old versus young and the young need to engage to tell the old (and those that service them like your "for profit" hospitals that charge $17 for a single pill) that enough is enough.
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Oh, and by the way what's the average age of congress?

Which way has the saving rate gone since GenXcess hit 18 in 1983?http://research.stlouisfed.org/fred2/series/PSAVERT
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I guess to many designer coffee drinks does that to the brain.
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Sorry, but Social Security didn't cause the $16 Trillion of debt, neither did Medicare.
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In fact, Social Security OWNS $2.5 Trillion of that debt.
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Drop another quarter,
and try again.
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NPWFTL
Regards

@Duckdawdger,
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You fail to consider that the majority of old people are Republicans, and the majority of Republicans support entitlement reform. Therefore it is not the elderly that are driving us off of the fiscal cliff, but middle age and younger people that are sympathetic to their cause. How many times do you hear in a week from leftists that government spending cuts are going to hurt the poor and elderly?

If you are right, then why haven't we seen concrete specific detailed proposals of what and where to cut Medicare coming from the Republican party? If you are right, that should galvanize the elderly to the cause of entitlement reform? There isn't specific proposals because they it's a vote loser, the AARP would be up at arms, sure some middle aged lefties would be to but IMHO it would be the aged GOP who would suddenly realize what they were losing and quicker than you could say Bingo! they'd switch their vote. It's actually quite a Catch-22 America is in.

Great point! Older Americans do vote more than any other segment of the population. The old vs. young conflict is a cold conflict as few even mention its existence. However, the American elder's fleecing of the younger generation's resources (e.g. grand medical benefits created when the average life span was 70 years[yet another rant tangent])is another example of our societal avarice, less Facebook and twitter. Though, I do know a few elderly using the above platforms.

"The most recent Trustees' report in April, the net present value of the unfunded liability of Medicare was $42.8 trillion. The comparable balance sheet liability for Social Security is $20.5 trillion."
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Need to look through the published books of accounts to see the actual true accounting of the mess that America is in. Unfortunately, dropping another quarter won't help.
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And oh BTW, for the benefit of all posters herein, what does "NPWFTL" mean?

"The most recent Trustees' report in April, the net present value of the unfunded liability of Medicare was $42.8 trillion. The comparable balance sheet liability for Social Security is $20.5 trillion."
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And corporate pensions are also "underfunded."
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Not to worry, we are just 1 pandemic away from erasing all of those made up accounting numbers.
(BTW.. SS isn't a retirement account, as you only get about $1,200 a month after taxes and Medicare premium.)
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How about we pay off today's debt and cut back on spending and/or raise taxes to take care of the previous debt as we find out what Gov't Agencies are responsible for that $16 Trillion of debt.
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How about we stop sending 2 aircraft carries into the Persian Gulf in order to protect oil supplies for other countries?
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We just gave the Syrian Rebels another $50 million on top of the $60 million earlier, and if they win we will probably have to borrow to spend on propping them up.
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We can't go on acting like the Romans, the Dutch, the Spanish, the British did, unless we want to end up like them.
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How about repealing the Bush43 drug plan and allow Medicare to negotiate drug prices, and find a way to pay for filling the "donut hole"?
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How about not wasting money rebuilding areas that get wiped out by hurricanes? (Moral Hazard agrument.)
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How about... (the list is almost endless.)
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Not
Published
With
Facebook
Twitter
LinkedIn
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Regards

I (a fiscal conservative) would prefer to decrease spending, but would consider raising taxes as necessary to completely fund all programs as is assuming everyone else wants to do it too. Here are the numbers:

For 2013
US Revenue $5.6T ($2.1T income taxes)
US Expenditures $6.8T (with about a $.25T increase per year after this one)
2013 shortfall: $1.2T
US Debt: $16T ($53,000 per person assuming population of 300M)

The cleanest way to pay this is for everyone to pay 57% higher total taxes this year (we could tax business, but they just pass the cost onto us anyway) to break even. Over the next 3 years based on projected budgets, we would increase our taxes by around 10% each year to keep up with the spending.

Next each of us (including those on disability, children, etc) would owe an additional $284.50 per month to pay the mortgage on our debt assuming 5% interest over 30 years.

One thing that is often missed is that a 57% tax rate increase will not result in 57% more revenue. Taxes are an incentive (or disincentive), and thus will effect economic activity at the margins. If people are taxed 57% more per year, a significant number of them will decide to retire, become a full-time mom, or work less to lower their taxable income. Of course the bulk of the population will have to go on working full-time, but not everyone will. Therefore a 57% increase in tax rates will result in a lower than 57% increase in revenue, probably dramatically lower.

My point is that we must gain 57% higher revenues through whatever means necessary to get them. Of course higher tax rates encourage people who don't need the money to defer income. The real issue is that people just don't want to pay for what they get, and our fearful leaders are willing to allow people to get free stuff and pass the cost onto future generations to pay for candy today. Talk about TAXATION WITHOUT REPRESENTATION!! Since we are unwilling to pay MUCH higher taxes, then the answer is to cut benifits.

The only way to get higher taxes is to cut the benifits to what we can currently afford. If this means putting granny on an ice flow, perhaps instead of pushing her off, people will pay more. Until we load granny onto the ice, there is no hope of paying more. There will have to be sacrifice. So far neither political party is willing to enforce the sacrifice (it is bad politics).

What will eventually happen is a catastrophic financial event which will force our decendants to live in a very grim world. Will it be 10 years, 20? 50? Dunno. But unless we do something about it, the day will come.

Remember, sequestration represents 2.4% of the total federal spending in the United States according to the Congressional Budget Office document 43907 published February 5, 2013. Remember, Barack Obama proposed sequestration. Remember Barack Obama signed a bill for sequestration. Remember, the budget deficit in the United States is out of control and United States borrows $.40 for every dollar it spends. Remember, Barack Obama was an active member of the corrupt Chicago political machine for decades.

Are you a Chicago Prof of Economics? That might explain things. These Wall Street Journal talking points have a certain Murdochian, Kochian, Norquistian je ne sais quoi about them. Is it a flavor? A smell? Or is it an aura, like the kind of aura you detect on a person who puts a pebble in his shoe before setting out in the morning? Please excuse the ad hominem; perhaps I'm channeling my inner Obama. But we can blame this getting off on a bad foot on The Economist. Much as I have slavishly devoted myself to reading its pages over the past few decades, and agree with it 90% of the time, it's painful how wrong they've been when writing about American Presidents. In the case of Obama they should consider taking the unconscious bias test to measure how much of an influence bias may be having on their opinion. It might also help explain the editorial disconnect with what is the current political reality. Don't forget - the unconscious bias test - it serves up all kinds of interesting insights.

The deficit is not out of control. It is very much under control but the US government does need more taxes from the upper income groups. Without that we have to have sequestration unless we cut social programs. There was absolutely no choice. Sequestration is the lesser of two evils.

It seems to me like the Economist has been very supportive of Obama, in comparison to the opposition. Perhaps you're just too deep in the Obama camp to see any sort of criticism as being fair or justified.

As someone who doesn't live in the US, I can say that although the specific spending cuts that are occurring due to the sequestration do not seem logical or particularly helpful, I cannot still find any other major economy in the world to offer anything even remotely approaching the strength or even the stability of the US. Where to go, if not America? The EU? China? Russia? India? Brazil? Mexico? I don't think so. Big money has still nowhere to go other than America, and it will likely stay this way for at least a couple of decades to come. I hope the American public, and politicians alike, will take necessary actions so that things do not change fundamentally to the worse so that two decades from now other large countries of the world will still have a democratic system to look up to.

Empires rise and fall with metronomic regularity, but their lifespans are shortening. The Roman empire lasted about 400 years, the British empire about 200 years, and the US empire since the end of WW1: about 100 years so far. And I have to say, it looks like the US is in decline.
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The fiascos in Iraq, Afghanistan and Somalia were examples of imperial overstretch on a par with Britain's Suez debacle. There is a fundamental division in American politics between left and right that does not seem bridgeable: the gun lobby and the fight over the 2nd amendment is a good example of something that needs changing but cannot be changed using the political tools available. Congress is broken.
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Meanwhile China is getting bolshie, looks with scorn at the US and pushes the envelope a bit further every year to see if Uncle Sam still has any money to put here his mouth is.
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I expect in my lifespan to see one or more states attempt to secede from the union, probably Texas, California and maybe Alaska.

America really didn't dominate much until WW II. And announcements of the end of American dominance started a couple of decades later (mid-1960s, if memory serves). A quote from Mark Twain comes to mind: "Reports of my dead are greatly exaggerated."
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I don't see Alaska departing -- they get way to much money from the rest of the country; and most of them know it. California doesn't differ enough with the country as a whole to be motivated. And Texas, before the could get to that point, will have sufficient demographic changes to be unlikely. If anyone decides to try to leave, it would probably be the Deep South -- as their attitudes become further distant from those of the nation as a whole. And the results of their last attempt may give them pause to wonder if it would be a good, or possible, idea this time. (Brief answer: NO.)

If you think this is a victory for the US economy then you are crazy. This is an economic illiterate's idea of deficit reduction - target the parts of the government that contribute most directly to employment and growth in the middle of a recession, rather than tackling entitlements or tax reform.

Generally, the American economy should be heading with tailwinds toward probably 2 to 3 percent growth short term.

So what's the problem. I'm going to tell you a secret that isn't reported in papers like the Economist.

Approximately 30 percent of the American electorate are flat out sociopaths/psychopaths. They're called the tea party. Their politics is based on class and racial resentment, ignorance, and a slavish deification of the rich.

30 percent may seem not too much, but in a Republic like America where you have the fillibuster and limited govt. by nature, it can gum up the works pretty good.

I would still say this: the best companies are still American, mainly because we take all comers. But our political system is currently epic fail.

The Tea party is mostly people who want a constitutional government. At this time, we have a government that appears to many to be overstepping its legal bounds. In the last 10 years, the federal government has grown by 40%. THIS is what the Tea party is responding to. Of course you can find whatever want by looking at individuals amongst some of the 72,000,000 people who claim to be part of the Tea party.

Getting rid of guns may be a good idea for example (not to me, but others might think so), but our current Constitution prohibits the government from doing it. There is a mechanism to change that if there is sufficient support. As a Tea Party member, I just think if people want change, they should change the constitution. If they have insufficient support to do that then you should try and convince people to your point till you do, or give up and work within the bounds of our laws.

You might consider making reasoned arguments rather than attempting to slander those who disagree with you.

The weather would be a great selling point here in California...
Also, I must disclose that, I am not completely unbiased: my mother has Canadian roots going back to the 1920's (she was not born there, though).

You're off your rocker. The tea party merely wants our government to stop borrowing so much money, to spend less, and to stop exercising so much power over the American people. It's a reaction against the excesses of the Bush/Obama years, when both government spending and government power were both increased dramatically. You really should read less propaganda.

Albert O. Hirschman died this last December. He was an early modern American economist who fought in WWII and helped save many from the Nazi and the Fascists. It seems like we are in the same crud only now we fight with only dollars and inconvenience. What a poor lot we are.

The limiting of money away from those who would make use of it because they do not merit it; seems to be the main justification. We don't pay those who aren't in pain. That'll make us rich. In the mean time the cash glutted multinationals haven't an original idea they dare promote to the public lest the market for those on the Petro-Go Round lose their grip.

Tis bravery to send the uninformed to die for petroleum. rah rah rah.

Somehow I don't think Mr. Hirschman would keep quiet. I'm so glad I just finished reading his Strategy of Economic Developement (C) 1958. He spoke "globalization" back then. He even took part in it.

Inevitable, irrational, perhaps even tactically necessary in the short term - but the devil lies in the details of implementation, which will determines the 'quality' of the outcome.

Opposing wishlists make agreeing a budget between the deadlocked US Congress and Senate controlled by opposing parties, impossible within the current budgetary frame of reference. Tempting as it is to give up on agreeing a budget deal and instead rely on another 'Continuing Resolution' for the status quo to continue after the current one lapses on March 27, that is not in the best interest of the US nor global economies.

Sooner, or it seems later, politicians will have to grapple the reality of unwinding the Federal Reserve's ballooning balance sheet of bonds bought with 'free money' printed by them in Quantitative Easing. Instead of planning to incrementally dump bonds on the market, politicians should be made to force the central bankers to offset and zero bonds - bought at zero cost to bankers - against the budget deficit and national debt, now.

As long as the public allows US politicians to play within the expedient rules of bankers ("heads we win, tails you lose"), our collective jobs and future remain locked into meaningless rivalries. While economists bury their head in the sands of theory, politicians are setting in motion a harsh cycle of economic stop-start's whose affects reverberate around the world 's developing economies with millions abroad hurt in 'collateral damage', alongside domestic casualties.

By redirecting QE money to make more budget available to reach a compromise acceptable to both sides, avoids the US taxpayer having to pay twice over for the financial market meltdown of 2007/8. Interest alone is a double edged sword - Operation Twist's effects are too small to relieve the debt pressure of liquidity injected into financial markets, and when rates rise the debt burden will reverse and become unbearable.

Reframing the debate is critical to healing social divides exploited by politics, allowing both sides to step outside of a sterile and futile blame game which offers no solutions.

The sequester has been on the cards since August 2011.
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And this train wreck has been in the cards since the November 2010 election.
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Gerrymandering ran rampant after the 2010 census in both the blue and red states, which led to congressmen further from the center. Moderates on both sides of the aisle declined to run in 2012.
. The two most obvious ways to restore the country’s fiscal health were deliberately excluded, because Democrats do not like one (cuts to government-funded health care and pensions)
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You need to read your own paper...
Are we to become corrupt like Argentina, or is your paper criticizing Ms. Fernandez for becoming more like us?
. Facing a financing crunch, in 2008 Ms Fernández nationalised the country’s private pensions.
. She has since turned ANSES into something of a public slush fund. In the past four years the treasury has sold the agency over $10 billion of bonds at paltry interest rates. The president has used the proceeds to fund popular projects, such as low-income housing, infrastructure and transfers to poor families with children. Meanwhile, in recent years the returns on ANSES’s investment portfolio have lagged behind Argentina’s estimated inflation rate of 25% (the official rate is lower, but is widely known to be doctored).
.http://www.economist.com/news/americas/21571911-government-drags-its-fee...
. and Republicans do not like the other (higher taxes).
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They know that with Bernanke on their side (low rates), Americans will borrow and spend and just like the gov't, worry about paying it back "tomorrow."
(1/3 of student loans of those under 30 years old are already delinquent.)
. So instead, the axe is falling on areas which are not really the problem in the first place, and are already being cut: defence spending and other “discretionary” programmes, meaning everything else the government does.
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Say WHAAAAT?
Defense spending doubled!
We are going down the same road that the Romans, the Spanish, the Dutch, and the British did by spending too much on defense for the rest of the world. So we can export our jobs and import the good they produce.
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Cut defense to $0, and go back to having import taxes pay for it.
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How did the Boomers and The Greatest Generation survive without Head Start as children?
How did they survive growing up without household A/C, cars with A/C, bluetooth, cameras, power windows, exotic sound systems, cableTV, smart phones, designer cookware, designer clothing, designer coffee, etc.
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How did they survive facing The Draft, inflation (after WWII and in 70's), financial repressson, recessions every 7 years, and then a Volker-induced recession?
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Somehow they did, and that was without having internet sites to whine about how bad they have it.
. There will not be a grand bargain, to use another metaphor popular in Washington, but plenty more petty bargaining.
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Correct.
If you haven't batten down the hatches yet, you might want to think about it sometime soon.
(Hint: businesses cut expenses.)
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NPWFTL
Regards

You're asking the wrong questions. What is really driving the increase in government spending is the unprecedented size in the elderly ("Boomer and 'Great' Generation") population and the unprecedented size of their demands for taxpayer support - especially pensions and Medicare but also other forms of welfare.
Today's young generation have lower living standards than their parents' generation, with lower real incomes, higher debt, much higher education costs, lower chance of being able to own their own etc. At the same time they have to support tens of millions of old people who either can't or won't support themselves. Changes in consumer electronics don't come into it.

What is really driving the increase in government spending is the unprecedented size in the elderly ("Boomer and 'Great' Generation") population and the unprecedented size of their demands for taxpayer support - especially pensions and Medicare but also other forms of welfare.
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HORSEFEATERS!
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What's driving the debt is:
1) Gov't taking on more debt in order to reduce the debt of the Household Sector, Finance Sector, and Business Sector.
2) Borrowing money to be the world's policeman.
3) People demanding something from the gov't and not wanting to pay for it.
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$2.5 Trillion of the $16 Trillion debt is owned by Social Security.
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Just as individuals buy Savings Bonds, they should be able to cash them in when they feel they need the money, so should Social Security.
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See an earlier FreeExchange, and look at the chart:
US Total Private Debt as Share of GDP
as well as my comments.http://www.economist.com/comment/1905209#comment-1905209
. Today's young generation have lower living standards than their parents' generation
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Their parents had bluetooth in cars?
Wi-Fi in McDonalds?
Smart phones?
CableTV? (have you seen the AT&T U-verse commercial where GenYners tell the GenZers how bad THEY had it?)
HUGE Flat panel TVs? (we had a 21" color TV for the family)
Sound bars?
Designer coffees?
Designer tennis shoes?
Designer clothes?
A recession every 7 years.
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Things were that bleak when I was young too.
But we just went to work, lived within our means, went to night college on the cheap, and didn't borrow.
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Yes, we had to sacrifice some things to get others.
But that's what Economics and Budgets are all about.
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Fulfilling unlimited wants with limited resources.
(Credit - as the young found out - is an unlimited resource.
Up to a point though.)
. Changes in consumer electronics don't come into it.
Yes they do.
How many times do consumers have to update their iPhones,
at $200 - $400 a crack?
How many large TV's have you gone through?
LCD => Plasma => LED => LED 3D => LED SmartTV
. At the same time they have to support tens of millions of old people who either can't or won't support themselves.
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Good luck with that!
As you yourself said, you guys couldn't manage your own life ("higher debt"), and someone is foolish enogh to want you to manage theirs?
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NPWFTL
Regards

Looking from the outside, (I´m Brazilian)this whole mess seems to have been made by a bunch of crazy men. 18 months have passed by and the Congress can´t reach a deal that pleases both sides? You guys are (still)lucky to have the reserve currency, otherwise there would be very nasty economical consequences.
It´s a very dangerous thing that these politicians are doing. China is not sitting idle while you commit financial suicide.

Someone might get the impression that the GOP don't like democracy. This will be 2 Democratic administrations in a row that they have tried to shutdown. I don't remember this threat ever facing a GOP president. The message is clear - they could care less about the country or the economy.

Thank God they are not in a position to frame policy only to obstruct it.

It has been clear for quite some time that the Republicans are not conservatives interested in ruling the country, but right-wing radicals intending to upset the current establishment of the United States (which they see as too 'liberal').

Unfortunately, even spoon-feeding this self-evident truth to the American electorate has been impossible, so these idiots keep electing Republicans year after year, delivering no eye-watering rebuke for their near-treasonous behaviour.

Two words - USER FEES.
Why should non flyers pay for air traffic control? or vegetarians pay for meat inspectors? Why not shake down everyone coming into the States to pay for the border guard security service that ensures we aren't carrying a dirty bomb?
And while we're at it, why not charge out the cost of military bases to the countries where they are stationed? Presumably, those countries get a huge benefit from the presence of Uncle Sam's military, why else would they have them there? And when America goes to war to protect national interests, doesn't that usually mean corporate interests? A user fee from those corporations operating in the next country that America is about to invade will certainly help defray the cost of that war. I feel sure that those corporations would welcome the opportunity to participate. How else can America recover some of the 5% of GDP it spends on its military and security infrastructure? At the very least, the American military would get a good reading on the value of the service it provides to allied countries and American corporations if it requested user fees!

Many nations that have US bases in them no longer would like them there. It is the US and its own interests that keep global bases in operation. Trying to exert "fees" for allowing a foreign nation to operate a military base that a nations citizens don't want there is a non-starter.

Beyond that, as for user fees, its not really practical, at all. There are already numerous taxes on specific items (gasoline, beds in a hotel, cars with exceptionally poor fuel economy), but these hardly pay for all goods and services that a country needs/uses. Further, some services are exceptionally hard to segregate and incur free riders. How do you divvy up defense? If Bob pays less in taxes, should the military not defend his freedoms?

While revenues need to be raised (I liked Romney's idea on limiting deductions), and some sacrifices need to be made in how social safety nets are structured (means testing, increase age, etc.), there is no panacea to the current political stalemate. This is almost a theological debate at this time, as facts fail to sway either party away from their core beliefs.

If Bob pays less in taxes, should the military not defend his freedoms?
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Bob has less to lose than a CEO or wealthy guy.
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Actually he has more to lose - his life - as the military will take him before the wealthy guy or CEO. (See: Romney, Cheney)
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Social Security didn't cause the $16 Trillion of debt.
In fact, they own $2.5 Trillion of that debt.
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NPWFTL
Regards

"Why not shake down everyone coming into the States to pay for the border guard security service"
As a J-1 visitor from Russia, every time I pay $170 for visa, and $180 SEVIS fee. Isn't that enough for you?

Ummm, I was using irony to make a point, however since you brought it up, exactly what US interests are served by keeping bases in foreign countries where they are no longer welcome? And while we're on the subject what detriments to that interest are caused by the existence of that very same base? And finally where does the balance of national interest fall out, is there a net benefit or a net cost to America's national interest by maintaining those bases? I don't expect a case by case assessment, but my point here is, why hasn't the government and the military done exactly that and begun to retrench its overextended and unwelcome foreign presence?

Both sides of the isle got out of Washington, DC just before the FAA cuts. The DOW is at an all time high, so why can't the Federal Reserve Bank also have more excise carbon eco tax revenues. Too bad you couldn't bribe me with a NASDAQ all time high. Computers are the wave of the future.